Kitimat vision of LNG boom clouded with uncertainty

Kitimat LNG boom clouded with uncertainty

Kitamaat Village, B.C. • On the north side of Douglas Channel, a quick boat ride from the Haisla Nation’s town site, an old log dumpsite covered by forest is awaiting transformation as the first liquefied natural gas (LNG) export site on Canada’s West Coast.

While surveying the band-owned oceanfront location from a fishing boat, chief counselor Ellis Ross pondered the massive work ahead.

“We are not prepared for all the tanker traffic,” said the 48-year-old Aboriginal leader, donning a dark business suit and wingtip dress shoes, markers of his new role in the energy world, while checking a fishing net for crabs.

“We don’t even have docks for tugs and barges. We’ll need to sit down with governments and proponents, look at the impacts and come up with a framework.”

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Two years from now, as long as market conditions and financing terms remain supportive, the Haisla’s partly owned BCLNG project will be loading for the first time British Columbia natural gas into tankers headed for Asia from a floating platform moored next to land-based facilities.

The project is one of three planned for the coast near Kitimat, and one of nine announced for Northern British Columbia so far.

The LNG opportunity emerged out of the blue three years ago after the tsunami and nuclear disaster in Japan triggered a rush by Asian countries to secure natural gas from Western Canada as a backup fuel.

With LNG proponents making grand announcements in recent months involving dozens of billions in spending, communities like Kitimat, Prince Rupert and others in the vicinity are preparing for the boom.

But they are also worried about the uncertainties of the business and the lack of visible progress on the ground.

“Generally, nothing has happened,” said Bill Eynon, president of the K.T. Industrial Development Society, a group promoting business development in the area. “There is skepticism. I have seen corporations pull out of developments after spending hundreds of millions because the economics didn’t seem right.”

The big danger to LNG plans?

“The price of gas could go up,” says Mr. Eynon, who is retired but has had plenty of experience with natural gas price volatility when he was the general manager of the town’s Methanex Corp. plant. The methanol export facility was conceived in the mid-1970s when the price of natural gas, used as feedstock, was under $2 per thousand cubic feet, and was shut down in 2006, when gas was near $12.

In addition to energy security, low Western Canadian gas prices are the other top reason behind the LNG rush, backed up by abundant deposits in Western Canada and proximity to Asia that makes transportation cheaper.

Kitimat, an industrial town of 9,000 residents built in the 1950s at the head of the channel by the Aluminum Co. of Canada (Alcan), had its share of disappointments.

Methanex, West Fraser Timber Co. Ltd., Eurocan Pulp & Paper, an LNG import terminal that was revived as an export facility and is now part of the Chevron Corp.-led project, were some of the commodity-based enterprises that pulled out over the years, leaving the local economy in shambles.

Up channel from the BCLNG site, farthest away from the town, a wharf is taking shape at the Chevron Corp./Apache Corp, but activity is in the early stages. Chevron bought a 50% interest in the plant last December, while Encana Corp. and EOG Resources Inc. backed out, and is in the process of becoming the project’s operator.

Down channel, near the town, the Royal Dutch Shell PLC-led project has purchased the old Methanex site, but a firm location for its project has yet to be confirmed. Shell held open houses in Kitimat and Terrace this week to explain its plans.

The government of British Columbia is working furiously to finalize fiscal terms before the pricing window closes.

And so is the Haisla Nation.

If you try to hide behind an environmental assessment or a process, we will oppose that as well. That just shows dishonesty

The band has for 9,000 years prowled the deepwaters of the inlet, living off its fish and protecting its environment. In recent years, it has positioned itself as the gatekeeper of development and watches over all projects.

“We oppose speculators,” Mr. Ross said. “We oppose crude oil. We also oppose any proponent who comes in and tries to go around us. If you try to hide behind an environmental assessment or a process, we will oppose that as well. That just shows dishonesty.”

An opponent of the Northern Gateway oil sands pipeline, the result of its bitter experiences with previous industries that polluted the area, the 1,500 member community was an early mover in the LNG opportunity and is now a dominant player through equity ownership, business development and land ownership.

Convinced that the business is safe because gas evaporates in case of an accident, the Haisla are co-founders, part-owners and landlords of BCLNG, a project that is expected to ship 1.8 million metric tonnes of LNG per year.

Its other partners are Houston-based LNG Partners; as well as recently added Golar LNG of Bermuda, which owns and operates LNG tankers, and an unnamed Asian company.

The consortium expects to announce a final investment decision by the end of the year.

The project is the smallest among those proposed, but is also the most advanced and the only one with Aboriginal ownership. Mr. Ross expects a price tag of about $1-billion. The band set up an office in Calgary, the heart of the oilpatch, to manage the business aspects, which it has had to learn.

“It will be … significant for the Haisla because it means ownership and it means land ownership,” Mr. Ross said. “We have never been a part of this type of development before, and we have never been landowners in fee simple status.”

The Haisla are also involved in the Chevron-led project, which is located on its reserve land at Bish Cove and will be yielding rent and taxes.

Its band members are benefiting from early employment opportunities and hope the industry will yield jobs on the water.

“We are a marine nation … we know the coast,” said Curtis Smith, 37, a boat captain who would like to assist tankers get in and out of the channel some day.

The Haisla have expanded their involvement by buying up most available land for development on the Channel.

Mr. Ross said the land buying binge, which has cost his community $3.1-million so far, gives the Haisla even greater say over development and puts to rest frustrations over unresolved aboriginal land claims, where the rights remain unclear. It’s a strategy increasingly embraced by B.C. First Nations, he said, as a way to take advantage of resource projects.

“Instead of sitting in the background watching the impacts and not having a say, now we are in and now we are becoming land managers,” he said.

Mayor Joanne Monaghan said so much of the proposed LNG development near Kitimat is on Haisla lands that revenue to the town will be small.

“The Haisla now own or have the option to purchase everything on the west side of the channel, except for a small parcel that we might be able to use for industry,” she said.

Kitimat would reap greater benefits from the proposed Northern Gateway bitumen pipeline, she said, but the project is so controversial the town is not taking a stand on whether to support it until regulators complete their review at the end of the year.

Still, preparations for the LNG boom are under way and the economy is vibrant. Ms. Monaghan said unemployment has dried up and investors are flocking in, looking to build hotels, buildings, wharfs, workcamps.

Tim Hortons has moved into town, the Dairy Queen is getting a facelift, housing prices have doubled, and the once ghostly city centre mall is teeming with shoppers.

“The restaurants are losing their people and crying out for staff,” said Ms. Monaghan, who only four years ago was organizing prayer meetings in hope divine assistance would bring industry back to town. “We never had a couple of pages of want ads.”

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